Correlation Between POSCO Holdings and PT Steel
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and PT Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining POSCO Holdings and PT Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and PT Steel Pipe, you can compare the effects of market volatilities on POSCO Holdings and PT Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in POSCO Holdings with a short position of PT Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and PT Steel.
Diversification Opportunities for POSCO Holdings and PT Steel
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and S08 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe and POSCO Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on POSCO Holdings are associated (or correlated) with PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and PT Steel go up and down completely randomly.
Pair Corralation between POSCO Holdings and PT Steel
Assuming the 90 days horizon POSCO Holdings is expected to under-perform the PT Steel. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 4.58 times less risky than PT Steel. The stock trades about -0.04 of its potential returns per unit of risk. The PT Steel Pipe is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.10 in PT Steel Pipe on October 20, 2024 and sell it today you would earn a total of 0.05 from holding PT Steel Pipe or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. PT Steel Pipe
Performance |
| Timeline |
| POSCO Holdings |
| PT Steel Pipe |
POSCO Holdings and PT Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and PT Steel
The main advantage of trading using opposite POSCO Holdings and PT Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, PT Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PT Steel will offset losses from the drop in PT Steel's long position.| POSCO Holdings vs. Genertec Universal Medical | POSCO Holdings vs. GLOBUS MEDICAL A | POSCO Holdings vs. Olympic Steel | POSCO Holdings vs. Khiron Life Sciences |
| PT Steel vs. ON SEMICONDUCTOR | PT Steel vs. National Beverage Corp | PT Steel vs. INTER CARS SA | PT Steel vs. Fevertree Drinks PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.
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